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How public-sector trade unions contribute to fiscal irresponsibility

Politicians often cite principal-agent problems in private-sector operations, like recent misbehavior in the financial sector, as justification for government intervention in the economy. However, political opportunism in such assertions is clearly at play given that the biggest threat to economic & financial stability comes from principal-agent failures in public sector activities.

In particular, public officials seldom act responsibly as agents of taxpayers when it comes to negotiating with workers employed by public sector institutions. As a result, public-sector employees from Greece to California enjoy job guarantees that are seldom found in the private sector.

Of special concern are retirement benefits that allow early retirement and benefit packages that most real taxpayers can only dream about. It is crucial to note that public-sector employees do not pay taxes in a meaningful sense, because there earnings are drawn from a pool of revenues created by burdening private-sector workers. Since workers paid by governments “earn” taxes, they are not net contributors. Indeed, it is a charade to collect taxes from public-sector employees.

Meanwhile, public-sector employees tend to be granted “property rights” to their jobs based on seniority privileges that make them unaccountable to taxpayers that ultimately pay their salaries.

Friedrich Hayek portrayed labor unions as an instrument for “coercion of men by other men” in that some workers could force their fellow workers into arrangements that the latter do not want. This problem is aggravated by allowing public-sector employees to join or form unions that grants them disproportionate power over taxpayers & the citizens they supposedly serve.

On a political level, unions operate just like any other lobbying special interests..They lobby government officials, litigate, advise members on elections and political issues, donate money, buy advertising & make endorsements for political candidates and parties. Indeed, labor unions in the US are perhaps more active in lobbying as in organizing workers or bargaining with employers or engaging in strike actions.

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Content of "Natural Order" attempts to reflect the commitment of Universidad Francisco Marroquin to support the development of a society of free & responsible individuals. The principal commentator for this blog is Christopher Lingle.